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A business-woman holding a pen thinking PESTLE (or PESTEL) is a business analysis concept that was originally developed by Harvard University academic Francis Aguilar. In its early days, it was referred to as PEST analysis, however the idea has since been expanded to include some extra elements. Each letter of PESTLE stands for a different factor that needs to be considered when a manager is determining where their operation currently stands in the market and where it is likely to go in the future. With this in mind, the acronym can be broken down into:
  • Political
  • Economic
  • Social
  • Technological
  • Legal
  • Environmental
But how important are each of these elements and what do they involve? Political factors cover how government policy will affect the business, with tax policies, trade restrictions and employment law just some examples of what is covered in this area. Inflation, the disposable income of consumers (for B2C organisations) and the general state of the economy all fall under the umbrella of economic factors, and it could be argued this will have the most significant impact on the market a business operates in. Meanwhile, social involves the cultural elements that could impact on how a particular product is viewed – for example, if a company is in the healthcare sector and the area they are working in is getting particularly negative or positive attention in the media. Technological often involves a firm’s output abilities, and how research and development is likely to impact on its processes. Legal is one of the latter elements to be added to the original set of components for this theory, and looks at how legislation can make a difference to company’s outlook. This could range from employment or health and safety law to consumer rights. The final category – environmental – refers to the impact of green issues on a business. Climate change is a particularly hot topic at the moment, with incentives available in some countries to encourage firms to take a more sustainable view of their operations, and this would be considered under this topic. PESTLE analysis is taught in more detail in some of our corporate training courses, if you’d like to learn more, then check out the wide range of subjects we cover today.

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